Thursday, April 27, 2006

  • M0: Is total of all physical currency, plus accounts at the central bank which can be exchanged for physical currency.
  • M1: Is the M0 as well as the amount in demand accounts (“checking” or “current” accounts).
  • M2: Is the M1 as well as most savings accounts, money market accounts, and certificate of deposit accounts (CDs) of under $100,000.
  • M3: Is the M2 as well as all other CDs, deposits of eurodollars and repurchase agreements.

? from Wikipedia, The Free EncyclopediaMoney Supply

On March 23, 2006 the Federal Reserve ceased publication of the M3 monetary aggregate, in line with an announcement it made in November, 2005. The M3 is a measure of money supply in the United States,

The M3 is most general of the many measures of money supply, the quantity of money available within the economy for purchasing goods, services, and securities. The money supply is monitored and adjusted by a central bank, to keep inflation in check, because money supply has to change in tune with real Gross Domestic Product (GDP) to prevent inflation (or deflation).

In November last year, the US Federal Reserve announced that it would cease publishing M3 data, saying, “[the] M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years”, adding that the costs of collecting the data required for the index outweighed its benefits.

Some commentators have questioned this decision and have speculated that this would allow the Federal reserve to covertly fund the US budget deficit and its negative balance of trade or hide the fall in international demand for the US dollar. In March, 2006, Rep. Ron Paul introduced a bill (HR 4892) requiring the Federal Reserve to reverse its decision.

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